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Linking sops with reforms will boost power sector
Proposals affecting the sector
Central planned allocation on the Accelerated Power Development Programme (APDP) has been increased to Rs 1,500 crore from Rs 1,000 crore.Priority under APDP is proposed to be given to states undertaking reforms. There would be preferential allotment of power to reforming SEBs from central public sector units (CPSU), additional investments by CPSUs in generation and transmission and preferential allocation of external aid.To speed up the process of reforms, MoUs with built-in milestones are being entered into with state governments for restoration of financial viability of SEBs. These milestones include installation of 100 per cent metering by December 2001, energy audit at all levels, specific programme for reduction of transmission theft, tariff determination by the state electricity regulators and SEB restructuring.The Electricity Bill 2001 is to be introduced in this session of Parliament.A package of initiatives to improve the power distribution system in rural areas has been launched. Rs 750 crore from out of RIDF has been earmarked for rural electrification. Bonds issued by the Rural Electrification Corporation Ltd (RECL) have been exempted from capital gains tax.Plan outlay to central sector power utilities has been increased from Rs 9,194 crore to Rs 10,030 crore. The cut-off date for tax holiday, for undertakings commencing generation of power or laying a network of new transmission and distribution lines, has been extended to March 31, 2006. Further, these undertakings will be entitled to a 10-year tax holiday in place of the existing two-tier benefit. Corpus in Rural Infrastructure Development Fund VII by Nabard has been increased by Rs 500 crore to Rs 5,000 crore. The capital gains tax exemption for the RIDF has been continued. Further, the interest rate charged by Nabard has been reduced to 10.5 per cent from 11.5 per cent.The tax on distributed profits of domestic companies has been reduced from 20 per cent to 10 per cent.
Impact of the announcementsThe power sector is expected to get a boost in the medium to long term with the policy initiatives proposed in this Budget. Linking sops, such as preferential credit access, power allocation and investments, to the pace of reforms undertaken by the SEBs is expected to push the reform process forward. Simultaneously support, through increased central allocations and capital gain exemptions, to the CPSUs' generation programmes and the RECL's rural electrification programmes would sustain capacity additions in the sector.
The overall sentiment in the power sector would improve with the extension of the tax holiday period and rationalisation of the dividend distribution tax. The successful passage of the Electricity Bill 2001, however, holds the key for further reforms in this sector. Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
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